Measuring labor supply and demand shocks during COVID-19

Pedro Brinca; Joao B. Duarte; Miguel Faria-e-Castro

doi:10.1016/j.euroecorev.2021.103901

Measuring labor supply and demand shocks during COVID-19

Pedro Brinca, Joao B. Duarte, Miguel Faria-e-Castro

NOVA School of Business and Economics (NOVA SBE)

Research output: Contribution to journal › Article › peer-review

66 Citations (Scopus)

Abstract

We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April 2020, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.

Original language	English
Article number	103901
Journal	European Economic Review
Volume	139
DOIs	https://doi.org/10.1016/j.euroecorev.2021.103901
Publication status	Published - Oct 2021

Keywords

COVID-19
Sign restrictions
Structural vector autoregressions
Supply and demand shocks

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10.1016/j.euroecorev.2021.103901

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title = "Measuring labor supply and demand shocks during COVID-19",

abstract = "We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April 2020, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.",

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author = "Pedro Brinca and Duarte, {Joao B.} and Miguel Faria-e-Castro",

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AU - Brinca, Pedro

AU - Duarte, Joao B.

AU - Faria-e-Castro, Miguel

N1 - Funding Information: Joao Duarte and Pedro Brinca acknowledge funding from# Fundação para a Ciência e a Tecnologia# UID/ECO/00124/2013# UID/ECO/00124/2019# PTDC/EGE-ECO/7620/2020# and Social Sciences DataLab# LISBOA-01-0145-FEDER-022209# POR Lisboa LISBOA-01-0145-FEDER-007722# LISBOA-01-0145-FEDER-022209# POR Norte LISBOA-01-0145-FEDER-022209# and CEECIND/02747/2018# Publisher Copyright: © 2021 Elsevier B.V.

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N2 - We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April 2020, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.

AB - We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April 2020, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.

KW - COVID-19

KW - Sign restrictions

KW - Structural vector autoregressions

KW - Supply and demand shocks

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SN - 0014-2921

VL - 139

JO - European Economic Review

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ER -

Measuring labor supply and demand shocks during COVID-19

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Keywords

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